Yours truly

This is our Blog on Personal Finance. We will attempt to be analytical as well as educative. We will tell you what we like and what we don't. We will tell you what we do with our money and what we tell you is what we will follow for us. Tell us what you like to see.

As a part of FPGI collaboration, I recently wrote an article for Janmabhoomi Pravasi, a Gujarati newspaper. This article is regarding managing the estimated shortfall in retirement corpus. Please click here to download Janmabhoomi Pravasi e-paper. Please select date as Monday, 27-May-2013 and Page no. as 2.

The article is published on the bottom right side. Since the article is in Gujarati, the English version is as follows. Please note that the two versions have slight differences related to editing.

With rising inflation, Retirement planning is gaining focus in India. Let us see how you can plan for your retirement. The steps we recommend are as follows:

Baseline your current expenses under various categories like Household, Lifestyle, Travel, Insurance, Dependents and EMIs etc.

Now estimate what expenses you would need in the retirement period. As an example, Health Care expenses are likely to be significantly higher and EMI Payout is likely to go away.

Add inflation factor between now and when you retire.

Decide your retirement age. Normally, Age of 58 is a decent assumption.

We recommend Life Expectancy of 85 Years of Age. This can higher or lower depending on your situation.

With these inputs you can calculate your Retirement Corpus with the help of Retirement Calculators available on various personal finance web sites, use Formulas in Excel or ask your Financial Planner. Now, if you assess that with your current and planned retirement savings, you are likely to have a shortfall, here is what you can consider:

Review your current expense levels & expected changes in retirement period. See if there is anything that can be optimized.

Re-look at your Retirement age of 58 Years and see if you can work bit longer. Consider part time working for a longer age.

Your post retirement corpus can also be partially invested in Equity through Mutual Funds.

Review your other Financial Goals and prioritize Retirement Savings. For example, if you planned to send your Daughter for US Studies, consider part funding by you and the rest through a bank loan by her. This will allow you to invest more for your retirement.

See if you can build regular income through Rentals from 2nd Home etc. We suggest you do not completely depend upon such rental income for your Retirement.

See if you have any inheritance that you have not factored so far.

Consider staying in a Joint Family with your Son. This will mean fewer expenses for both yourself and your son.

Consider Reverse Mortgage of your House as a backup plan.

Please note that you should also keep in mind your Risk Tolerance while making any investment decisions. Doing a Risk Profile will let you know your Risk Tolerance. While you may like to take an aggressive investment approach to meet your Financial Goals or secure Retirements, you must consider your ability to withstand the adverse financial outcomes. For doing your Risk Profiling, you can consult a Financial Planner or use resources available on Personal Finance websites like Moneycontrol.com

When we embark on a career, there are many factors that influence us – society, family, friends, financial constraints, our outlook etc. Most of us try to choose a safe, lucrative career so that we are financially secure even though we might have some other option in our mind which we feel is our true calling. But if we get a chance to take up our true calling, we should be aware of how to go about it and think through in terms of a financial perspective as well. The chance could come due to taking a break or working post retirement or a job loss or burn out in the current job. Here are some tips to help one sail through this situation –Identify your interests and talent – You might be interested in something like playing the guitar but if you are not really good at it then it is better to keep it as a hobby and focus on something that you have the skills or the talent else it will be a struggle to earn money. You might get frustrated knowing that you are not the best. It will lead to financial insecurity and burnout. You can also try to think of the games that you played as a child or your favourite things to do as a child. It will give some direction to your ambitions.Training – You have to plan in advance ideally when you are in your first career to get into the second career. You have to identify training courses/certifications if required and take them when you find time while on your first career. You should be committed to constant learning and complete attention to the demands of the new field when you are already in it. You have to ensure that you are qualified enough or have the relevant skills/talent so that the transition to the second career is smooth as far as capability goes.Financial Security – Are you prepared to compromise on your lifestyle to some extent? Have you thought about your dependents, their needs and wants? You should be aware of your financial stance and financial implications of the move on you and your family. You should start planning, researching and acting on this move when you have the financial security of your first career. If you are retired and thinking of a second career, it will add to the income planned. But if you are considering an alternate career, then check how many months you can live without the current steady flow of income/earnings. If you are starting a new business, then you have to factor the investments involved in that in your financial plan. Check out the availability of loans/venture capital that you can get in your new profession/business. You have to ensure that your loans etc. can be being paid off and if you should add to them, you should have a concrete plan to repay them. Basically you have to extend your financial plan to consider this move. A second innings can provide you opportunity to add to your retirement kitty, stay productive and fulfil your dreams. It is imperative to plan for it so that it is productive and fulfilling.SummaryIt is a great idea to embark on a second career but one should be aware of various factors to consider like skills, financial constraints and opportunities before one leaps into it fully. #gettingyourich

Often, it is not just your earning and saving capacities which determine how you build your wealth. Growing your money also depends on your behaviour and emotions. Here are a few behavioural aspects which determine your wealth building capacity:Desire for everything: When you start wanting to own everything that comes your way, it means you are headed for financial trouble. An extravagant lifestyle may be highly desirable; but if you do not have the financial wherewithal for it, it is best not to venture down that path. People wish to have luxurious phones, lavish cars and extravagant holidays abroad. In most cases, expenses on such items are incurred by swiping credit cards or taking loans, but without considering the actual financial position. Remember, all big ticket items need to be carefully planned for. You must separate all expenses into regular expenses which are necessary and discretionary expenses which are on luxury items. Only after your necessary expenses are met, you must plan for the discretionary ones.Greed to have more of everything: Sometimes, it is not just the desire to own everything which causes the problem. The greed to have more and more of anything can also spell trouble. There are three different aspects of Greed which you should not have when it comes to financial well-being:

Various offers and schemes offered by retailers will result in you spending more than what is actually necessary for you. Often, it is seen that tempting offers come with several conditions, which if you are not careful in analyzing, will end up in causing you greater harm than good. Hence you must always be careful in looking at schemes and offers carefully before availing them.

Another aspect to greed is when it comes to cashing in on your investments. This is often true of equity-related investments like stocks and mutual funds. Many investors, even if they are of the conservative type are unwilling to cash in on profits, and wait to earn more. You must always fix a target for your investments and exit when you achieve those targets.

The third aspect to greed is when you keep accumulating the same type of asset, with the greed of earning more and more returns from the same asset, simply because of its spectacular performance in the past. For example, you should not keep investing in gold because of its past performance. Similarly, you should not hoard stocks or mutual funds of a single sector or theme, simply because you must have a well balanced, diversified asset portfolio.

Anger at everything: When you show anger and resentment at all your decisions- be it financial or otherwise, you end up acting impulsively which will not be in your best interests. For instance, blaming the research report you trusted blindly before investing in a stock which performed badly, or blaming external factors for your poor salary package will make you frustrated and cloud your decision making capabilities. So learn to look at all actions and decisions rationally before letting anger come in your way.Jealousy: Envy is another quality which you should not have, if you wish to grow your wealth. When you see your friends and relatives with something, you want it too, irrespective of whether you can afford it or not. This can result in a financial wreck, as you do not live within your means, and rather you are always copying others. Learn to work towards financial independence by curbing jealousy.Conceit: Very often we see that investors do not exit a particular investment, even though it is performing badly. Holding on to it because of greed is one reason. But many a time, there is a pride factor or conceit associated with the decision to hold on to the investment, simply because you do not want yourself to be proved wrong. This can result in a costly financial decision, as you may end up losing more than your current status. Had you taken in your pride and chosen to exit the investment at the right time, you could have earned more by investing in another avenue giving you better returns. So learn to keep a stop-loss on your investments and act proactively before it is too late.Laziness in financial matters: Laziness in general is not good for anyone. This becomes even more relevant when it comes to financial matters. When you procrastinate paying your bills or put off your decision to make investments, it costs you dearly, either in the form of penalties or lower returns for your money. Automate your bill payments and act on time to avoid financial problems. Change your behaviour to work towards a better financial life. Start today! #gettingyourich

The contents of the article are original. We would like to give credit to ET Wealth for the idea inspiration.

As the popular saying goes, “Health is Wealth”, it is a known fact that the healthier one is, the wealthier he/she feels. If you are healthy, you can automatically work efficiently to earn more money and build your wealth. You also get to build your wealth by not spending on medicines and doctors. However, have you realised that there are several aspects which are common to being healthy as well as building money? Let’s look at some common factors between the health and money:There is no short term solution: Good health is built over a long period of time. When you give up on habits like smoking and drinking, exercise regularly, have a proper diet and lead a healthy lifestyle, you will witness the positive effects on your health over a long period of time. Good health cannot be obtained overnight, and you need to give yourself considerable time to see it happen. Similarly, building wealth also happens over the long term. Investing in equity gives the best returns over the long term, and this will happen only if you are not swayed by short term volatility and instabilities in the market. The money you earn can be built into a sizeable corpus only when you give it sufficient time to grow.Discipline and regularity is of utmost importance: Most of us begin exercising or following a healthy diet ambitiously, only to give it up within a short span of time. Following a healthy lifestyle religiously under all circumstances is very important to remain healthy, and this is possible only if you have discipline and commitment. The same applies to building money as well. You cannot build your wealth if you are irregular in your saving and investment habits or if you do not maintain budgets regularly.Investing time and money is of equal importance: When you wish to be healthy, you must invest sufficient time to exercise, go on walks and follow healthy diets. Most working professionals cite unavailability of time as the reason to remaining unhealthy. Spending money in the form of enrolling for gym classes or dance classes is also sometimes necessary; although you can remain healthy even without this if you have a good lifestyle. Investing money is of more importance when it comes to building wealth. With a plethora of investment products available today, it is very easy to get lost and make worthless investments. Invest in a good financial planner who will help you with your personal finances. Also invest in good books and attend programmes which help you build your wealth. All this also necessitates spending adequate time and energy.Have a good mix of everything: You cannot achieve good health by doing only one activity - like eating healthy or working out. It requires a combination of several things like following a good diet, having a healthy lifestyle, getting sufficient sleep, being stress free, exercising regularly etc. Following only one of the above and not doing other things will not give you the desired results. Similarly, when you want to grow your money, you should have a healthy mix of investments in your portfolio like debt, equity, gold, real estate etc. It is important to have a balanced asset allocation in place, which suits your risk and return expectations. The earlier you start, the better: We all know that it is never too late to start anything good. Nevertheless, the earlier you start working towards a healthy lifestyle, the better it is for you and the easier it is for you to reach your goal. In the same way, the earlier you begin saving and investing, the more you build your wealth, in a shorter span of time. Read our blog here on why it is better to start investing early in life.Small mistakes prove to be costly: Both in getting good health as well as building wealth, you realise that small mistakes you commit regularly can balloon into big complications later on in life. Whether it is eating unhealthy food regularly or spending more than saving, you will realise that these stop you from reaching your goal. It is for this reason that both health and wealth are taken as priorities usually when it is too late and you do not see any other way out. It is known that enjoying good health as well as building huge wealth leaves all of us energetic and fresh in the mind. So start today, and work towards building both a healthy and wealthy life. #gettingyourichSmitha HariTeam GettingYouRich.com

The other day, we had a family get-together, and two of my uncles got discussing about their retirement plans. One of them had just realised from his financial planner that he fell short of the retirement corpus he required to maintain the present lifestyle. He had 10 years to go for his retirement. Many of you might be facing this situation, when you have only a few years left for retirement, but the amount invested looks short of what is needed. Retirement planning is a critical part of financial planning. The retirement corpus you build should be able to help you sustain your current lifestyle after retirement as well. When you factor in inflation, you realise the amount you need on retirement is much higher than what is determined by a simple calculation. Here’s what can be done to build your corpus to the desired level, to help you live a comfortable retired life:

Ensure you have adequate risk cover for your life and your health. Post retirement, purchasing insurance policies may be impossible or expensive due to the age factor. Hence you must ensure you are adequately insured.

When you have about 10-12 years left for retirement, take a stock of the retirement corpus you will have on retirement with the present level of investment. If you realise you are falling short of the target, the first obvious step in this direction will be to increase your contribution towards this goal. When a majority of your investments are exposed to equity and equity-related instruments, you can achieve your retirement corpus in a easier manner than when compared to debt exposure. However, make sure this suits your risk profile.

When you get closer to retirement, at say, five years or so, you should look at gradually de-risking your portfolio. This is to insulate your retirement portfolio from volatile market movements, which can reduce the value of the corpus. However, you must not completely move your investments to debt, as you may realise that returns may not match up to inflation. Therefore you should always leave a small portion of your portfolio in equity-based investments to give a fillip to your overall returns.

When you are nearing your retirement, you may have to meet important goals of your life like your child’s post-graduation or your child’s wedding. When you receive any windfalls or inflow of a large lumpsum amount when you are nearing retirement, use this to meet your goals and do not dig into your retirement savings.

Invest in instruments which will help you give regular returns after your retirement. Examples of such investments are fixed deposits and dividend mutual funds.

Repay your debt before you retire. Home loan is the most important liability of any individual’s life. If you do not repay your debt before you retire, this will cause a strain on your cash flows post retirement. This necessitates a larger retirement corpus. Hence make sure you have no outstanding liabilities when you retire.

Saving is always worthwhile, and it is never too early or too late to start saving for your retirement. Retirement savings is usually an ignored concept. Make this a priority. A well-structured financial plan can help you lead an easy, stress-free retired life. Smitha HariTeam GettingYouRich.com

The Financial Planners’ Guild, India ( FPGI ) is an association of Practicing Financial Planners to create awareness about Financial Planning among the public, promote professional excellence and ensure high quality practice standards

We have come across a number of cases where accumulated Provident (PF) Balance is not in good shape. While there could be many reasons but mostly the problem comes while transferring the PF. It often takes inordinate amount of time and in many cases the transfer just does not happen.

The Employee Provident Fund Organization (EPFO, a Government of India organization) is making efforts in the right direction. They are Computerizing in Phases & have already deployed new facilities like E Passbook & Grievance Management System (GMS). Further, with UID Aadhar Card, we may get lucky in the near future, not needing to transfer the balance every time there is a job change.However, what do you do if you currently have an issue with your PF Transfer? Here are some tips:Identify where the transfer is stuck:For PF Transfer, normally below parties are involved:

In some cases, the Receiving and Sending PF Office may be the same. You would have used Form 13 and submitted to your new Employer. Firstly, please ask your new Employer to provide you an acknowledgment of Form 13 submission to the Receiving PF Office. Based on this, you can chase the receiving PF Office and check further with the sending PF office as the case may be. Meeting the PF Officials in person is a good idea though this may not be feasible if this office is not in the same City.Track the status of your transfer request on the EPFO WebsitePlease click here to visit the EPFO Site & track the status of your request. You will have to select the State of the PF Office, select the Regional PF Office where your PF Account is maintained and enter the establishment code & Account number. Please note that in most cases, the extension code field (Second last box from right side) needs to be left blank.Generate the E Passbook for old and new accountsYour E Passbook will give you the exact status if the PF Transfer has taken place or not. Please click here to visit the EPFO website and generate your E Passbook. In one registration, you can have up to 10 PF Accounts with different organization. However, you will not be able to download E Passbook for more than one account with the same organization. If your passbook is not ready, you will have to wait for few days. Recently, we are observing many cases of delays here. The good part is that they will intimate you via SMS when your passbook is ready for download.Raise & adequately document your Grievance. Please click here to visit the online tool for raising your Grievances with EPFO. If you do not know where your PF Transfer is stuck, then it is recommended that you should raise separate grievances with both the concerned PF Offices (i.e. Sending as well as Receiving). Please carefully preserve the Grievance number. So far, we have not observed a good track record for Grievance resolution through this online tool. So if you do not see any response or action in couple of weeks after having raised the grievance, it will be a good idea to send a physical letter detailing your grievance and mentioning the Online Grievance Tool Reference number. It is advisable to use speed post for sending such correspondence to the concerned PF Office. You should also keep your both New & Old employer in the loop.Use RTI If you still do not see any action or resolution to your grievance, next step would be to make an application under RTI and send it to the Public Information Officer under the respective PF Office. Along with the application, you will need to send a Postal Order for Rs. 10, favoring the respective Accounts office (e.g. Accounts Officer, EPFO New Delhi). There is no fixed format for application as such. You should briefly and clearly explain the background and query the status of your Grievance. Again, please include reference of your original complaint on EPFO’s Grievance Management Tool and attach copies of earlier correspondence. Normally, you should receive the response within 30 days for an application filed under RTI. In case of no response or unsatisfactory resolution, you could go in for an appeal process under RTI. Please click here to know more about RTI. If you like, you can also escalate your grievance to the Cabinet Minister in charge of Labor Ministry in the Central Government.Your PF may have been maintained at your Company’s PF Trust. In this case, you should simply chase your Old Employer.We normally do not recommend you to withdraw your PF balance. In any case, if you are finding issues with your PF Withdrawal, the steps would be similar. You should check with your Old employer, raise a grievance with the respective PF Office in the Online Tool, formally document the Grievance and finally use RTI.Remember, this is your hard earned money & no one else but you have to protect it.Source Credit:http://www.fpgindia.org/2013/04/protecting-your-provident-fund-corpus.html #gettingyourichRohit

The other day my colleagues and I were discussing about LTA and I realized that no one really knows everything about LTA. People are not clear as to when they can claim it, what can they claim as part of LTA or for whom they can claim it. Here we have attempted to demystify LTA and explain the rules around it.

LTA stands for Leave Travel Allowance and is a component of one’s salary. It is given to salaried persons wherein if they travel they can claim the money spent on the same. The Income-Tax department allows you to claim tax exemption on this claimed amount twice in a block of four calendar years. It is a good tax saving device for salaried employees.

LTA can be claimed only for cost of travel. It can be claimed for bus, car, air or train travel. It does NOT include money spent on sightseeing, food or hotel accommodation etc.

LTA can be claimed twice in a block of 4 years. The blocks are decided by the government. The current block is January 2010-December 2013. As you can see, calendar years are considered here. If you miss claiming LTA in one block, it can be carried forward to the first year of the next block.

LTA can be claimed for the shortest distance from the starting point of the journey till the destination. Moreover if you have a long winding travel plan, the last route will be considered for your claim.

The travel has to be within India. In most companies, you need to submit proof of travel. If the travel is by train, train tickets are to be submitted as proof and maximum amount allowed is the 1st class AC fare. If you have travelled by air, the Economy class air fare of the National carrier by the shortest route or the amount spent which ever is less can be claimed. Please ensure that you submit the boarding pass as well. If you have used some car rental services, the relevant bills have to be submitted.

You should also ensure that you have applied for leave during that time.

LTA can be claimed for family which can consist of spouse, children, dependent siblings and parents. You cannot claim it for your family if you are not part of the travel.

If two people in a family are part of the salaried class, only one of them can claim LTA for one travel.

If you cannot claim for LTA, you will get the LTA amount that you are eligible, post tax deduction on the same.

Hope this has helped you in decoding LTA and the policies associated with it. SummaryLTA stands for Leave Travel Allowance and is a component of your salary. It is paid along with the salary but one is exempt from tax on this amount provided one travels as per the rules and submits the required proof by claiming for the same. #gettingyourichVidya KumarTeam GettingYouRich.com